The entrepreneurial spirit is alive and well in Colorado's Mile-High City. While the economic down-turn and credit crunch have snuffed growth plans for many small business owners and would-be owners across the nation, a small Denver-based franchisor of gourmet sandwich shops is thinking “growth.”

Spicy Pickle, which began franchising in 2003 and currently has 34 franchisees in 14 states, continues to add stores while adapting its menu to build sales from consumers who are gripping their purse strings more tightly.

Spicy Pickle is a fast casual restaurant that offers made-to-order panini, submarine-style sandwiches, pizzetti (Neapolitan thin crust pizza) and salads, prepared with freshly baked, scratch-made breads and high-quality ingredients.

As a fast casual restaurant, Spicy Pickle does not offer full table service but delivers meals to tables. Fast casual fills the space between fast-food where no table service is available and food is paid for and delivered to customers at registers, and casual dining with full table service.

The store menu includes a choice of seven signature submarine-style sandwiches, eight signature panini, six salads, six signature pizzetti and five soups, as well as combination meals consisting of a one-half sandwich and small soup or salad. Customers also may customize their salads, pizzetti and sandwiches, choosing from rosemary focaccia, and white and honey-wheat-with-oats ciabatta bread; 12 meats; eight cheeses; an unlimited number of 22 toppings and an unlimited number of 14 spreads.

“Our business philosophy includes making sandwiches you cannot make at home. Customers have more than 150,000 different combinations available to make,” says Kevin Morrison, co-founder and chief culinary officer. “This differentiates us from other concepts and helps build our name.”

Appreciation for high quality

Morrison, 43, and Tony Walker, 37, launched the first Spicy Pickle restaurant in 1999 in Denver. Both men had gained valuable experience working individually in upscale restaurants across the nation before working together in a Denver eatery.

They share a common value: an appreciation for high quality products. “We use high quality ingredients with no preservatives or monosodium glutamate, except the color in our yellow cheese,” Morrison explains. “This is part of our strategy to attract the growing number of health-conscious consumers to our restaurants.”

The Denver Spicy Pickle (above) on Broadway Ave. features a wall of windows to the bakery production area.

Using fresh-baked bread also underscores their commitment to quality. “It only makes sense to serve our sandwiches on fresh-baked, scratch-made bread,” he continues.

In January 2003, the company hired Marc Geman, former president of PretzelMaker, who had sold his company a few years earlier, as chief executive officer and opened its first franchised location later that year.

An associate of Geman assisted with the first round of raising capital. Since then Spicy Pickle has gone twice to the public markets to raise additional funds; the initial public offering in October 2007 generated nearly $2 million, and a later private offering raised close to $6 million, which enabled the company to open five corporate stores and purchase three franchised locations.

Spicy Pickle's target customers are 21 to 45 years old. The company says it intends to expand nationally by locating restaurants in and near downtown settings where daytime population is dense. Other locations include technical centers, government complexes, universities and medical centers, where large numbers of administrative and professional people are employed. Opportunities also exist in big box centers, each anchored by a large tenant, and in areas of both white collar workforce and high-income households, the firm says.

As the company has grown, Morrison says, “letting go was very difficult and still is for some things. But we will never compromise on important aspects, such as ingredient quality.

“When some companies grow, their food quality diminishes. But, as we have grown, we actually have increased food quality. I deal with purchasing, so I can stay on top of it.”

All the while, consumers developed a perception that Spicy Pickle “is the sub shop that's a bit more expensive. But, you get what you pay for,” Morrison says. “In our initial three stores, customers responded well, and we saw a lot of repeat business. They are willing to pay for high quality.”

Built central bakery

Until last December, Spicy Pickle corporate and franchised stores in Colorado received fresh-baked focaccia and ciabatta daily from a quality-minded Denver wholesale bakery. Spicy Pickle opened a 1,200-sq.-ft. bakery, Crumb Rustic Bakery, adjacent to a company-owned store near the University of Denver.

The company needed better control of distributing the bread to the stores and the ability to allow operators greater flexibility to submit orders and changes to orders, Morrison says. He also wanted it for conducting product research, as well as for training franchisees of out-of-state stores.

Bakers at the company’s Crumb Rustic Bakery scale honey, wheat and oat ciabatta dough for 28-oz. loaves and 5-oz. rolls.

Morrison notes that the first six months were difficult, particularly in achieving top product quality. For example, he mixed test batches in 10- to 20-lb. quantities, ran them through a mechanical dough divider, scaled the pieces by hand and then baked them in a reach-in convection oven. The finished product was superb, Morrison recalls.

They baked larger production batches in a double-rack rotary oven. “We experienced shrinkage and could not explain it,” Morrison says. “After two weeks, we realized the divider was beating up the dough.”

They tried to compensate by mixing larger batches, but that threw ingredient costs out of whack with the increasing costs of flour and other ingredients. In addition, the divider required some 45 minutes change-over time.